Only time will tell if the changes in the Dodd-Frank Act regarding the Home Valuation Code of Conduct (HVCC) will be a good thing. The HVCC is supposed to be gone in 90 days. But what changes can we expect?
The Federal Housing Finance Agency (FHFA) implemented the HVCC in May 2009 after all the complaints about appraisals. And it has been a major disaster according to many in the real estate industry. I think it was a case of the pendulum swinging too far away from the way things were. Without a doubt, HVCC is a controversial regulation, and lead to appraisal management companies (AMCs), which in turn some said lead to a higher cost for consumers.
In the coming months, the “appraisal independence standards” will be rewritten. I just hope we will see logical changes that will benefit the home buyers and sellers. Considering the government is involved, I am not sure if wishing for logical changes is even possible but, hey, we can always dream!
What I have read is that Fannie Mae or Freddie Mac will be able to accept any appraisal report completed by an appraiser selected or paid by a mortgage loan originator. Which hopefully means I will not get any more phone calls from appraisers from 2 hours away that cannot find comps or do not know the area.
One of the best parts of the changes, in my opinion, is that appraisers will be paid at market rates. If you have been in real estate for any amount of time, you know that every one from appraisers to inspectors to other REALTORS deserves to be paid a fair amount for their time and work. And appraisers deserve to be fairly compensated for their work just like every one else.
The new standards will mean that loan originators are prohibited them from making payments, threats or promises to an appraiser to influence them. I find this amazing because every person I know in the mortgage business is ethical and I have never seen them do anything like this. Of course, if I knew they did play dirty, it would be time to find another lender to work with. Birds of a feather flock together...
If the property does not appraise for an amount that someone with an interest in the transaction likes, then they will be allowed to ask the appraiser to consider other information! Such as other comparable sales or they can correct errors in the appraisal. This is another wonderful change in my opinion and should lead to more accuracy.
Of course, I feel sorry for appraiser having to listen to how someone's home is worth more than it really is. Or an agent that is upset about a value that is lower than the CMA they performed. But maybe the elimination of HVCC will get one of the problems with the housing market fixed. Only time will tell!
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